implicit cost

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Implicit Cost

The opportunity cost of an activity. Implicit costs are what a company or individual could have earned had a different decision been made. For example, suppose an independent consultant has two clients and she spends some time working on the first client's project. The implicit costs are what the consultant would have made had she worked on the second client's project instead. Implicit costs contrast with explicit costs, which are what someone actually spends on an activity. It is also called an indirect cost.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it forgoes the opportunity of renting it out for some other use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself using a SHADOW PRICE based upon the current market rates for renting the property See PROFIT, EXPLICIT COST.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it foregoes the opportunity of renting it out for some other alternative use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself based upon the current market rate for renting the property See PROFIT, EXPLICIT COST, SHADOW PRICE.

References in periodicals archive ?
Also, $300 (10%) of the indirect expenses and $500 (10%) of the depreciation are allowed as part of the home office deduction.
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Contracts should also include a waiver of consequential damages barring any indirect expenses such as lost profits.
However, after excluding the favorable 67-basis-point impact from fuel sales and the 16-basis-point effect of the aforementioned accounting change, O&A expense would have edged up 2 basis points, largely as a result of higher labor costs and an increased reserve for real estate litigation, partly countered by lower losses from property impairment and disposals, lower occupancy costs, and reduced store indirect expenses.
Backing out the favorable 67-basis-point impact from fuel sales and the 16-basis-point effect of the aforementioned accounting change, O&A expense would have risen 2 basis points, largely from higher labor costs and an increased reserve for real estate litigation, partly countered by lower losses from property impairment and disposals, lower occupancy costs and reduced store indirect expenses.
2 million, mainly on reduced cost of sales and lower indirect expenses.
Facilities operations are often the major portion of the business's indirect expenses, therefore, facilities will not be under close scrutiny.
Allied health students are particularly hard hit because many indirect expenses aren't considered or anticipated when doing college financial planning.
The magnitudes of the output elasticities presented in the Table 1 indicate that the utilized proportional change of direct and indirect expenses have the highest proportional contribution to the production and revenue generation when keeping other variables constant.
It is generally referred to as a job cost accounting system, which is a subsidiary ledger where costs are accumulated by each cost objective with the appropriate allowable indirect expenses allocation.
Nevertheless, if the sole proprietor is diligent in his recordkeeping so that the DPGR, cost of goods sold, direct expenses, and indirect expenses can be related to QPP, then there will be QPAI and the sole proprietor can still take a section 199 deduction.
Although the majority of absence is short term, the average cost to the employer, including direct and indirect expenses is currently a staggering pounds 800 per absent employee.